International Trade in Albania

News Related to International Trade in Albania

Business outline for Albania

Main Industry Sectors

The share of agriculture in the GDP is about 20%. The sector employs almost 60% of the active population. Agricultural production is concentrated on wheat, corn, oats, sorghum, cotton, potatoes, vegetables, the olive, tobacco, fruits, beet sugar, vines, livestock farming and dairy products. Agriculture suffers from the lack of modern equipment, ownership and land parceling problems, all of which lead to a relatively low productivity. It has to be noted that agricultural production is higher than its share in the GDP. As a matter of fact, a large part of the produce is consumed by the farmers themselves and, therefore, it is not sold.

The industrial sector accounts for about 20% of the country's GDP and employs 15% of the active population. The sector is concentrated on food processing, textiles and clothing, timber work(construction), oil, cement, chemical products, mining, transport and hydraulic energy.

The services sector represents close to 60% of the GDP and employs a fourth of the active population. Tourism, telephony, the banking and insurance sectors are in full expansion.

Since the beginning of the 2000s, the share of income from the agricultural and industrial sectors has been falling progressively. In a parallel direction, the share from the services sector is increasing each year and the Albanian economy has been led notably by the dynamism of the services sector (tourism, telephony, banking and insurance).

The sectors of telecommunications, energy, minerals and medical equipment are expected to develop in the next following years and they offer good opportunities.

Economic Overview

Albania was the last central and eastern European country to adopt free-market reforms. Even though the country's economy has improved during the last few years (especially since 2003), Albania still remains one of the poorest countries in Europe, with an estimated GDP per capita of around USD 4,000 in 2008. Therefore, nearly 20% of the population still lives below the poverty threshold.  More than 50% of the GDP is made up by the informal economy, a fact which has hindered the current economic reform program.  In addition, the country is very dependent on remittances from Albanians working abroad, mainly in Greece and Italy.  Despite a slight inflation increase in 2008, the rate is relatively stable and it has remained at about 3%.

The signing of the Stabilization and Association Agreement with the European Union, on June 12, 2006, represents a significant development for Albania's partnership with European countries. The current government is pursuing a program focused on the struggle against corruption, organized crime and trafficking; and it is establishing liberal-inspired reforms aimed at preparing Albania for a future membership to the EU and at attracting foreign investors.

Since Albania is moderately integrated in the global capital flows, the impact of the economic crisis was less spectacular than in other countries of Eastern Europe.  Despite this, the economy was not prosperous in 2008, its debt was doubled, exports were half of their usual and there was a significant decline on the remittances from the Albanians living abroad.

Despite the financial crisis, the country's GDP made progress in 2009 attaining 3%, and  2% in 2010, which was mainly due to the healthy condition of the construction and services sectors.  The development of the country in the next following years could equally be benefited by the perspective of an official candidature to become a member of the European Union.  According the Albanian government, the country should revive with a growth of more than 5% in 2011.

FDI in Figures

Foreign direct investment has been increasing constantly since the beginning of the 2000s: 4.70% in 2005 and 6.6% in 2007. Currently, FDI stock has reached almost USD 2.5 billion, which means more than 20% of the country's GDP. These investments are essentially in the oil, metal ore, infrastructures and construction sectors, and more recently, in the telephony sector.

Albania has set up reforms to boost FDI.  As a fact, the State has adopted a tax reform that is advantageous to foreign investors. Corruption and administrative difficulties could be discouraging for investors. The long-winded procedures to obtain operating licenses in the trade, construction and tourism sectors have slowed down investment progress. In addition, investments continue to suffer from the lack of infrastructures and a poorly defined property law.

In the context of the global economic crisis, foreign direct investments in Albania have strongly decreased in 2009 and 2010, mainly due to the decline of remittances from Albanians living abroad (-27%) which represents 15% of the country's GDP.  This trend should continue in 2011 because the financial condition of the European countries has an important impact in the Albanian economy.

FDI Government Measures

Tax and legislative reforms have been put in place, as well as new laws on public and private partnerships, public spending, free-trade zones, company registration and electronic signature. On the 1st January 2008, the Albanian government decided to include companies in a single tax rate of 10%, which was being applied to households since 1st July. A single counter will simplify administrative procedures for companies. The country also ratified the "Investment Charter": an initiative of the Stability Pact aimed at reforming the legal environment in order to facilitate FDI in the Balkans. Measures are also taken to reduce by half, non-tariff bariers and to shorten the length of time required to register a company (from the current 40 days to only 8 days).

In addition, on 16 August 2006, the Prime Minister, Sali Berisha, presented the "Albania for 1 euro" solution: this measure aims to offer investors public land at 1 euro, staff training at 1 euro, technological water at 1 euro, the cost of registering a company at 1 euro, and entry into Albania at 1 euro.

Therefore for a number of years, Albania has established measures aimed at attracting foreign capital. Guarantees such as equal treatment of national and foreign investors and tax measures like the absence of VAT in certain sectors will allow for the development of FDI in the country.

Country Strong Points

Albania's strong points are:
- A strategic geographical position (with ports on both the Adriatic and the Ionian Sea);
- Significant natural resources;
- Cheap manpower;
- Prospects of joining the European Union.

Additionally, Albania is still a developing country which needs foreign investors to develop entire sections of its economy, a fact which provides interesting opportunities.

Country Weak Points

Albania remains one of the least developed countries in Europe. A fifth of its population lives under the national poverty line and the country still suffers from very inadequate infrastructures. In addition, the Albanian economy remains fragile and is heavily dependent on foreign organizational aid.

Up to now, the main hindrance to FDI development has been the dominance of personal relations over the law and legal procedures: competition is rarely fair and in reality far removed from the legal decisions, corruption exists and despite efforts to fight it, it remains one of Albania's major problems. The taxation and Customs systems also need to be improved. Albania must continue its reforms and, above all, ensure they are effectively enforced, especially in the area of the fight against organized crime and corruption, the reinforcement of the Rule of Law, the freedom of the judiciary system and media freedom.

Foreign Trade Overview

Albania is focused on imports. In these recent years, imports have registered a growth of more than 25%. The main import goods are high value-added products such as machinery and equipment (14.5% of total imports), metals, vehicles and means of transport (6.7% of imports). Albania's main suppliers are Italy, Greece, Turkey and Germany. The country mainly exports mineral ores (15% of the total exports), as well as textile products and shoes, metal, crude oil, vegetables, fruits and tobacco. Albania's main customers are Italy, Greece, China, Serbia and Montenegro. The European Union provides 40% of Albanian imports and accounts for 80% of Albanian exports.

The trade deficit reached 29% of the GDP in 2007.  The increase in imports is due to the rise of international prices in certain goods and electricity.  Additionally, exports are neither sufficiently diversified nor competitive in terms of prices.  Furthermore, the economic crisis has had an impact on exports, which experienced a drop of 15% in 2008, this decrease has continued in 2009 and 2010 since Albania's commercial partners, also affected by the crisis, have reduced their demand for Albanian products.